Business Law

Chapter 9 Offer and Acceptance

Objectives
Identify the requirements of an offer Recognize a counteroffer Identify the requirements of a valid acceptance Describe how an offer can be accepted

Contracts
Agreement a meeting of two or more minds, a synonym for contract Offer a promise or commitment to perform or refrain from performing some specified act now or in the future

Requirements
A serious, objective (readily recognizable and accepted by others) intention by the offeror Terms must be reasonably certain or definite so that the parties and the court can ascertain the terms Offer must be communicated to the offeree

Intention
What a reasonable person in the offerees position would conclude the offerors words and actions mean Offers made in obvious anger, jest, or undue excitement do not meet the serious-and-objective test

Intention
Expression of Opinion Preliminary Negotiations
A request or invitation to negotiate is not an offer

Advertisements, Catalogues, and Circulars

Invitations to negotiate

Auctions
With or without reserve

Definiteness
Reasonably definite (determined or fixed) terms The acceptance can make the offer definite

Communication The offeree must have knowledge of the offer in order to claim it.

Termination of the Offer By action of the parties By operation of the law

Action of the Parties

Revocation of the offer
Express or by action Effective when received Revocation to public, same manner as offer

Option Contract
An offeror promises to hold an offer open for a specified period of time in return for a payment (consideration) given by the offeree

Action of the Parties

Rejection of the offer by the offeree
Effective when received by the offeror An inquiry does not constitute rejection

Counteroffer by the offeree

A rejection of the original offer and simultaneous making of a new offer

Mirror Image Rule

By Operation of the Law

Lapse of time Reasonable period of time
Subject matter of contract Business and market conditions

By Operation of the Law

Death or incompetence of the offeror or offeree
Offer cannot pass to heirs, guardian, or estate

Supervening illegality of the proposed contract

A statute or court decision that makes an offer illegal automatically terminates the offer

Acceptance
A voluntary act (words or conduct) by the offeree that shows assent (agreement) to the offer

Requirements
Must be accepted by the offeree, not a third person Acceptance must be unequivocal (mirror image rule)
Ordinarily, silence cannot be acceptance

In most cases, must be communicated to the offeror

Mode and Timeliness

Mailbox Rule acceptance becomes effective upon dispatch, if mail is an authorized means of communication Express or implied Implied
Same or faster means Distance

Exceptions
Not properly dispatched Offer specifically states acceptance by a certain date Change of mind
Sends rejection first, then acceptance First received by the offeror